Cablegate: December 2008 Meeting of the Working Party for the Wto

R 151621Z DEC 08



E.O. 12958: N/A

SUBJECT: December 2008 meeting of the Working Party for the WTO
Accession of Azerbaijan


1. (U) Summary. The sixth Working Party Meeting on Azerbaijan's
Accession to the World Trade Organization (WTO), held on December 11
in Geneva, was widely attended by other WTO Members and highlighted
the renewed energy shown by Azerbaijan in a number of areas. Prior
to the meeting, Azerbaijan had submitted a Legislative Checklist, a
TRIPs checklist, responses to Questions and Answers, and new
information on agriculture supports and export subsidies. The
responses to Questions and Answers, in particular, allowed the
Secretariat to draft a Factual Summary of the trade regime in
Azerbaijan. In the meeting, the United States and the European
Communities (EC) posed numerous questions on the summary. Further
questions are to be submitted to the Secretariat by January 23.
After appropriate responses are drafted by Azerbaijan and made
available to WTO Members, the next Working Party will be scheduled.
We project that this will occur sometime in the first half of 2009.
A plurilateral on agriculture was not held during this meeting
because agriculture negotiators from many delegations were engaged
on Doha Round-related work. The Chairman Lewalter suggested that
that an agriculture plurilateral take place before the next WP
meeting. End Summary.

Report on Bilateral Goods and Services Negotiations

2. (U) Azeri Deputy Foreign Minister Mahmud Mamed-Khuliev reported
that Azerbaijan is intensifying its efforts to diversify its non-oil
sector and increasing its investment in infrastructure, especially
in light of the current financial crisis. He indicated that his
delegation has stepped up bilateral negotiations. The United States
reported on its meeting with Azerbaijan on market access in November
and noted that while progress was made, there is still a significant
distance to go on both goods and services. (Note: See paragraph 9
for additional information on the U.S. bilateral. End note) The
European Communities noted the bilateral goods and services meeting
that it held with Azerbaijan on December 9th in Brussels. Brazil,
India, Japan, Korea and Norway signaled that they had recently met
with Azerbaijan on the margins of the WP meeting, or were planning
to. Ukraine said it was initiating bilateral negotiations. Pakistan
spoke up generally in support of Azerbaijan's accession on
appropriately flexible terms. Paraguay, as leader of the landlocked
developing countries group, asked that Members take into
consideration Azerbaijan's geographical situation, noting that trade
transaction and transport costs for such countries tend to exceed
those of other countries. The Chairman exhorted Members to continue
to advance bilateral efforts in parallel with the discussion of
Azerbaijan's trade regime.

Legislative Action plan

3. (U) Deputy Minister Mamed-Khuliev said that Azerbaijan is
close to full implementation of its legislative action plan. Some
measures, including four (unspecified) major acts, have already been
adapted by parliament. He said that a Presidential decree on
additional measures requiring legal action is being prepared, and
that remaining draft regulations and legislation are moving to an
inter-governmental review. He asserted that only one normative act,
the Law on Tobacco, is still in process of preparation. He
expressed gratitude for U.S. technical assistance in the preparation
of laws. The United States and European Communities noted a number
of areas where we look forward to receiving additional legislation,
for example, the new Customs Code and revised Customs Tariff law.
It became clear in the ensuing discussion of the factual summary
that there are a number of areas where legislation still is
required. The Chairman encouraged Azerbaijan to continue to update
its legislative action plan on a rolling basis to show the status of
documents that are being drafted, considered, and approved.

Examination of the Factual Summary

4. (U) The United States and European Communities posed numerous
questions throughout all sections of the factual summary and
indicated that they would submit specific questions in writing, as
well. The Azeri delegation's ability to clarify technical questions
on the spot during the meeting was limited, although attempts by
Azeri technical experts to provide answers were somewhat more
constructive than the attempts during the May 2008 Working Party
meeting. The written responses to the Questions and Answers that
Azerbaijan provided prior to the meeting tended to be much clearer
and forward leaning in terms of showing a willingness to resolve
specific problems.

5. (U) The role of state-trading enterprises and commercial and
natural monopolies, and the possibilities for privatization of such
entities, requires much more documentation and explanation by the
Azeri side. Azerbaijan was able to clarify the status of several
entities that are prohibited from privatization as well as the
status of various health and pharmaceutical entities. Similarly,
regarding price controls, Azeri officials were able to describe the
administrative process for making decisions on pricing, but further
detailed questions went unanswered and will require follow-up. The
Azeri side did not answer our questions about whether or not IT and
telecom goods containing commercial grade encrytion are covered by
licensing procedures, despit follow-up questions from the Chairman.
The United States and European Communities urged Azerbaijanto
elaborate the part of the summary dealing wit the powers of
executive, legislative and judicil branches of government and to
clarify hierarch and appeal procedures. Azerbaijan confirmed that
the new draft law on customs valuation will addres appeal

6. (U) The United Statesurged Azerbaijan to bind at zero other
duties an charges (currently applied at zero) and raised cotinuing
concerns about WTO-inconsistency of motor transport duties. The US
and EC both raised concerns about export taxes on scrap and said
that the export ban on scrap metal must be removed. Azerbaijan did
not respond directly on these points. On the VAT exemptions for
domestic agriculture, Azerbaijan maintained that it currently needs
this policy for development of the sector, and only indicated that
it could look at its elimination in the future. On the status of
trade remedies legislation, Azerbaijan responded that national
legislation that is in conformity with WTO requirements is being

7. (U) Regarding the issue of agriculture export subsidies,
capital-based representative Elmar Mammadov intervened to say that
the factual summary needs to reflect Azerbaijan's request that as a
landlocked vulnerable economy, the appropriate provisions of the
Agreement on Agriculture (Article 9.4) should apply. On SPS, Canada
and the United States pressed Azerbaijan to join Codex Alimentarius.
The Azeri team responded that appropriate legislation related to
Codex is being considered at the Minister of Cabinet level, and
noted that a draft decree on SPS is under development and can be
shared with delegations. Generally, Members viewed the SPS section
of the factual summary as underdeveloped. The United States called
for a SPS Action Plan detailing when and how Azerbaijan plans to
fully comply with the WTO SPS Agreement principles. On Intellectual
Property Rights, the United States and the European Communities
stated that they would submit specific questions regarding the
Copyright Law, the Law on the Protection of Intellectual Property
and Combating Piracy as well as questions regarding general
enforcement efforts. [Note: This is not an exhaustive list of the
questions posed by the U.S. delegate about the factual summary, but
it reflects the areas that were discussed the most among Members].

Chairman's conclusion

8. (U) Chairman Lewalter concluded that on the basis of questions
and responses by Azerbaijan, the Secretariat will revise the factual
summary. He acknowledged that the Azeri delegation had pressed for
the Secretariat to move to draft the first Working Party report.
The Chairman said that while the Secretariat updates the Factual
Summary, it will assess, in consultation with other Members, whether
any sections are technically ready for a working party text.

Next Steps from the U.S. Perspective / Prospects for 2009

9. (SBU) Despite good progress on multilateral documentation and a
more productive Working Party meeting than was experienced in May
2008, Azerbaijan's lack of progress in market access is troublesome,
and will have a significant bearing on Azerbaijan's accession
process in 2009.

10. (SBU) The U.S. bilateral meeting with Azerbaijan in Washington,
DC on November 18, 2008 confirmed little substantive improvement in
Azerbaijan's goods and services market access offers. The greatest
challenge to further progress on market access is Azerbaijan's
inability, thus far, to define more narrowly its sensitivities, both
in goods and services. In an effort to move the process forward,
the U.S. has asked for more detailed (goods-specific and
services-specific) information on Azerbaijan's sensitivities, which
will enable USTR to consider possible flexibilities. However,
Azerbaijan up to this point has listed entire sectors as highly
sensitive. This is particularly true of agricultural market access,
an area in which there has been no progress.

11. (SBU) Azerbaijan is now expected to provide revised market
access offers based on U.S. feedback. The new Azeri offers, when
they come, will be crucial. New offers that again show little or no
real, substantive progress on opening commercial markets could force
the United States, other Working Party Members and the WTO
Secretariat to move resources to other priorities, potentially
delaying the accession process. End.


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